McDonald’s Corp.’s new promotion down south that offers customers a small fries and a double cheeseburger for US$2.50 bodes well for the company’s prospects this summer.

The nationally advertised U.S. value tier looks a lot like one David Palmer at RBC Capital Markets believes worked well for the fast-food chain in the New York City area, giving him more confidence in his above-average earnings estimates for 2015 and 2016, as well as his outperform rating and US$110 price target on the stock.

Palmer noted that the promotion doesn’t look as compelling or as “protein-forward” as Burger King’s US$1.49 10-piece nugget or two for US$5 sandwich deals. However, he thinks McDonald’s offering will probably be more powerful given the low value profile it has sustained in the past few years.

“As we found in our consumer purchase intent study, the quickest near-term fix for McDonald’s is to become sharper on value,” Palmer said in a note to clients. “By easing away from the Dollar Menu in late 2012, it failed to support one of its key brand attributes (e.g., value) and undercut one of its main scale advantages (e.g., national advertising).”

July is expected to be a critical month for McDonald’s, with its earnings call set for July 23. Palmer believes a turn for the better in the company’s U.S. division, which accounts for about 40 per cent of profits, could become visible ahead of that date due to the new value tier and other changes such as improved food quality and transparency marketing, more customization, and the launch of digital payments.

“Although it will be left up to the company as to how it communicates how Q3 is starting, we believe July will be indicative of the trajectory of the U.S. recovery,” the analyst said.